18,000 Mitchell-Lama Apartments Saved from “Unique or Peculiar” Increases

Six years of legal battles ended  on July 25 with a victory for tenants in current and former Mitchell-Lama rentals. The landlord of a former Mitchell-Lama building on the Upper West Side decided not to appeal a December appeals court decision that prevented owners from claiming that leaving the program was a “unique and peculiar” situation entitling them to massive rent increases. 

This means that the residents of 17,980 apartments—current and former Mitchell-Lama rentals built before 1974—are now rent-stabilized tenants like any others, and safe from such increases.

In the late 1990s, as owners began to take buildings out of the Mitchell-Lama program, one landlord came up with a creative idea: Raise the first “base rent” when the buildings went into rent stabilization. Instead of the new rent being set at what the tenant had been paying in Mitchell-Lama, it would go up to the free-market rent.  That would effectively empty the building, and vacant apartments could be easily taken out of stabilization forever.

The owners sought to use a loophole in the state law that put all buildings built before 1974 into rent stabilization. The loophole permits the state housing agency, then called the DHCR, to grant increases in the first rent-stabilized rent under “unique or peculiar” (U or P) circumstances. Owners claimed that just taking a building out of Mitchell-Lama—and as a result losing the tax abatement they got for keeping rents affordable—was a U or P circumstance. 

In some buildings, the rent would have doubled as it increased to whatever the market would bear.  In others, such as Central Park Gardens on the Upper West Side, it would have been quintupled. 

Tenants fought back.  The tenants association in Westgate (then called “KSLM Apartments” and now called Stonehenge) struggled through one level after another in court.  Their case culminated at the state’s highest court, which ruled that the DHCR (since renamed Homes and Community Renewal) had to consider the owner’s application for U or P increases.  With several years of legal bills mounting, the tenants finally settled with the landlord, with DHCR approval.

After Eliot Spitzer took office as governor in 2007, however, the DHCR issued a regulation: Just leaving Mitchell-Lama is not by itself a U or P circumstance, and if owners are suffering economically they have to rely solely on the “hardship” provisions available to all owners of rent-stabilized apartments to raise rents. (That requires opening their books for inspection and is not so popular among landlords.)

Landlords challenged that regulation in court.  It was invalid, they insisted, and unconstitutional. But in November 2009, a state court judge held the regulation valid, ruling for the DHCR and for the 17 tenant associations, mostly from the Bronx and Manhattan, that had intervened in the case.  On Dec. 28, 2010, the mid-level Appellate Division unanimously affirmed the lower court’s ruling. 

 Most of the affected landlords decided not to contest that decision. As the July 25 deadline for seeking permission to appeal approached, only Steve Witkoff, owner of 95 West 95th St., was left.  Witkoff and his lawyer, Maria Beltrani, decided not to pursue further appeals. 

This means that landlords in buildings already out of Mitchell-Lama cannot retroactively raise the first stabilized rent that tenants paid in those buildings.  Owners of buildings still in the program may now have less of an incentive to leave it. However, as long as there is no state law explicitly stating that leaving Mitchell-Lama does not entitle landlords to U or P increases, HCR could still change the regulation.